DBRS trims Source Energy

DBRS said it downgraded Source Energy Services Canada LP’s and Source Energy Services Canada Holdings Ltd.’s (together, the co-issuers) issuer rating and senior secured first-lien notes rating to CCC (high) from B (low) and B, respectively.

The action removes the co-issuers’ ratings from under review with negative implications, where they were placed on Nov. 21. All trends are negative. The recovery rating on the senior notes has been lowered to RR4 from RR3. DBRS based the analysis on the financials of the ultimate holding company Source Energy Services Ltd.

The removal of the under review with negative implications status of the ratings follows the parent’s announcement it reached an agreement with its banking syndicate to lower the fixed charge coverage ratio applicable under the company’s asset-backed credit facility from a minimum of 1.25 times (x) to 1.1x; and received $5.9 million of insurance proceeds in connection with the accident at its Fox Creek terminal. The covenant relaxation and receipt of insurance proceeds should provide the company with some near-term flexibility.

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